MrG - I've seen this happen many times too. Actually, one of my former direct reports who I put on probation is now a Vice President with the company. In fairness, some of them are lucky enough to go from terrible job fit to good job fit, or they're going through some shit and finally get it together.
But the others just make you want to strangle the hiring manager.
GF - sorry about the layoff. I hope they at least gave you a severance package